Fibonacci bounce chalks up a third day on close above 50-day MAs

Bulls will be happy the bounce managed to add another day, but the buying volume remained disappointing. However, we did see easy breaks of 50-day MAs, which opens up moves to 200-day MAs and/or August highs.  Whether we ge there will largely be determined by buyers stepping in with volume, but we can let price action drive momentum for now.

The S&P added to the bullish momentum with a new 'buy' trigger in the ADX, but other technicals remain bearish.  The index is just above holding on to its relative performance advantage against the Russell 2000 - but is on the verge of an underperformance switch to this index.  The other indicator to watch (which I don't mention much) is the Rate-of-Change (ROC).  If ROC can return above '0' it would mark a cyclical return for bulls. 

The Nasdaq is lagging behind the S&P with technical still net bearish, including a relative underperformance to the latter index.  However, it did manage a close above its 50-day MA, and unlike the S&P, was able to register an accumulation day. 

The Russell 2000 continues to outperform the Nasdaq, although the rate of outperformance is slowing.  There was no accumulation (for the ETF, $IWM) although slow stochastics remain very close to a bullish cross of the mid-line stochastic.  Because of its relative outperformance to peer indices, it may be the first to test its 200-day MA.

One of the belwether sectors is the Semiconductor Index.  Of all the indecs it's the one struggling the most.  The sector is still to challenge its 50-day MA and has come closest to retesting July lows, but it has begun to climb out of an oversold state. 

The 3-day rally is not one to inspire confidence, but as long as it continues bulls will keep their advantage.  An undercut of last week's low will almost certainly deliver a move back to the July lows and shorts may want to jump on that - but until this happens 200-day MAs are targets.

You've now read my opinion, next read Douglas' blog.

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